[Pages S6433-S6435]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

UNITED STATES ACTION ON JAPAN TRADE

Mr. BYRD. Mr. President, I thank the Chair.
Mr. President, our United States Trade Representative, Ambassador
Kantor, this morning announced a pair of initiatives regarding our
trade relations with Japan for which he is to be commended and which
deserve the strong support of this body.
With respect to the first initiative, Ambassador Kantor has announced
a plan to impose trade sanctions under section 301 of the Trade Act,
pursuant to an investigation into the Japanese auto parts aftermarket.
On this issue, this body has already spoken decisively by agreeing to a
resolution offered on yesterday by the two leaders and myself, and the
vote was 88-8. The Senate, thereby, decisively supports the imposition
of such sanctions, given the complete unwillingness of the Japanese to
address their market closing practices which block access of the United
States parts to Japanese consumers. This has resulted in persistent,
large trade deficits which are unfair to our industries and cost tens
of thousands of jobs every day.
The Trade Representative is on solid ground to publish a proposed
retaliation list under section 301.
Regarding the second initiative, the Trade Representative has also
announced his intention to take a broad case against Japan's automotive
practices before the World Trade Organization [WTO] by invoking the
dispute settlement mechanism. As stated in his letter to the new
Director General of the WTO, the case will be based on the fact that
``Japan has failed to carry out its obligations under the WTO'' and
thereby ``nullified and impaired benefits accrued to the United States
under the WTO'', and ``impedes the attainment of important objectives
of the GATT and the WTO.''
As my colleagues are aware, in the debate last December over
America's accession to the new WTO system, the question of the impact
on United States sovereignty by creating binding decisionmaking dispute
settlement bodies in that organization was discussed. In fact, it seems
clear that some other nations were quick to sign up to the WTO,
specifically in order to attack United States trade laws.
In testimony before the Senate Finance Committee today, a former
United States trade negotiator, Alan Wolff, stated with respect to the
context of negotiations creating the WTO,

Our negotiators should have begun to recognize that there
was something suspect about the U.S. proposal for an
automatically binding system when the rest of the parties to
the negotiation made an about face and embraced it. They
thought that they were curbing America's ability to act under
section 301.

So, some opinion has been expressed that it would be risky to go
before the WTO in that a dispute settlement panel could rule against
United States 301 action in imposing new retaliatory tariffs on
Japanese products.
But the question is, what is in the national interest of the United
States? Let us keep our eye on the ball. The case of Japanese
discrimination on a very persistent and massive scale has been clear
for many years in the automotive market as well as in other markets. No
serious person can take issue with this.
I commend the approach taken by Ambassador Kantor. There should be a
good case against Japanese automotive industry barriers before the WTO
because they are so overwhelming--Japanese practices overwhelm tariff
schedules and make them irrelevant to the real dynamics of the market.
If there is not a winnable case, I, for one, would suspect something
deeply flawed with WTO decisionmaking and not the United States' case.
Let me say that again: If there is not a winnable case, then I, for
one, would suspect something deeply flawed with the World Trade
Organization decisionmaking and not something flawed about the United
States' case.
The U.S. Trade Representative has maintained consistently that the
operation of section 301 as a bilateral mechanism regarding specific
barriers and practices is completely appropriate at the same time that
we also attempt to breathe life into the new WTO dispute system. WTO
rules do not cover the complete range of barriers that are practiced by
the Japanese and, therefore, 301 treatment is totally appropriate in
many instances. Furthermore, as a general matter, it certainly appears
reasonable to believe that if Japanese practices nullify the value to
be gained from the tariff-lowering regime of the GATT, then the United
States should prevail in a World Trade Organization dispute.
The Trade Representative has established a two-track approach taking
the initiative before the WTO and exercising our bilateral rights under
our trade law. I do not see any inconsistency in this approach. It is
the right approach because our practices in our market are transparent
and open, while Japan's practices are not. Thus, it is a fair challenge
to the WTO to recognize and act on the reality of the market situation.
Mr. President, I ask unanimous consent to have printed in the Record
the letter sent yesterday from Ambassador Kantor to the new Director
General of the WTO, Mr. Renato Ruggerio, which gives prefiling
notification of the intention of the United States to initiate a WTO
challenge against Japanese automotive discrimination. In addition, I
also ask unanimous consent to include an op-ed piece from today's
Washington Post by the vice chairman of the Chrysler Corp., Mr. Thomas
G. Denomme, outlining in detail problems that Chrysler has experienced
in attempting to break into the Japanese market.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Executive Office of the President,

U.S. Trade Representative,

Washington, DC.
Renato Ruggiero,
Director-General, World Trade Organization, Geneva,
Switzerland.
Dear Director-General: I am writing you today to give pre-
filing notification of the intention of the United States to
invoke the dispute settlement mechanism of the WTO to
challenge the discrimination against United States and other
competitive foreign products in the market for automobiles
and automotive parts in Japan. It is our intention to
officially file a case with the World Trade Organization
(WTO) in approximately 45 days.
Through its actions and inactions with respect to the
automotive sector, Japan has failed to carry out its
obligations under the WTO, has nullified and impaired
benefits accruing to the United States under the WTO, and has
fostered a situation in the automotive sector that nullifies
and impairs such benefits, and impedes the attainment of
important objectives of the GATT and the WTO.
The market access problems in the automotive sector reflect
problems endemic in many sectors in Japan. Relative to gross
domestic product, Japan imports far fewer manufactured goods
than any other G-7 country and maintains a persistent surplus
in its global trade and current accounts. Japan's imports of
manufactured goods are one-fifth to one-tenth the level of
European countries and nearly one-third the level of the
United States, relative to GDP. Overregulation, toleration of
market restrictive practices and market structures, and
pervasive and unwarranted intervention in the Japanese
economy all work together to systematically discriminate
against foreign competitive imports.
The United States has focussed on the automotive sector
because of its central importance to the United States and
other economies, and its huge contribution to the U.S.-Japan
trade imbalance. This sector accounts for almost 5 percent of
the U.S. GDP, and it directly provides jobs for 2.5 million
Americans. The 1994 U.S.-Japan trade imbalance in the
automotive sector was $37 billion, nearly 60 percent of the
total U.S. trade deficit with Japan and nearly a quarter of
the entire U.S. global trade deficit.

[[Page S6434]]

This trade imbalance reflects a lack of access for foreign
autos and auto parts to the Japanese market for the past 35
years. In Japan today, foreign automobiles have a 4.6 percent
share of the market. In the United States, foreign autos
occupy a 32.5 percent share of the market. Throughout the
rest of the G-7, foreign cars range from 33 to 55 percent of
the market. In Japan, foreign auto parts account for only 2.6
percent of the market. In the United States, foreign parts
make up 35 percent of the market. Throughout the rest of the
G-7, the market share of foreign parts ranges from 16 to 60
percent.
While we are first and foremost concerned about the impact
of Japan's automotive barriers and restrictive practices on
the interests of U.S. companies and workers, this is a
general international economic problem, adversely affecting
the interests of many trading nations. Japan's huge trade
imbalances in the automotive sector contribute substantially
to unstable international economic conditions which undermine
global economic recovery and growth, and the health of the
international trading system.
The Government of Japan in the past implemented measures to
protect the domestic automobile industry, such as
discriminatory allocation of capital, foreign investment
restrictions, high tariffs, and a range of other measures. As
these barriers were removed and as tariffs were reduced
through multilateral tariff negotiations, the Government of
Japan developed other measures to protect domestic producers
from foreign competition. Such measures included, among
others, excessively burdensome inspection requirements for
imported vehicles, discriminatory access to vehicle
registration data, and maintaining an unreasonably complex
system of motor vehicle inspection and repair regulations.
At the same time, the Japanese automotive sector as it has
developed has been pervasively characterized by close
interlocking relationships between auto manufacturers,
suppliers, distributors, dealers, and those who repair and
inspect cars. The Government of Japan has guided or tolerated
the creation by industry of informal market restrictive
measures and market structures, which have placed a critical
role in excluding foreign competitive suppliers of autos and
auto parts from the market.
Foreign motor vehicle manufacturers now face a situation in
which limited access to auto dealerships--which until
recently were prohibited from carrying products from
competing suppliers and which still fear that carrying a
competitor's products will damage their relationship with
their current supplier--
seriously impedes market access. In addition, foreign auto
parts suppliers find it virtually impossible to sell high
value-added parts to Japanese manufacturers.
In the auto parts aftermarket, excessive and complex
regulations channel most repairs to garages tied closely to
Japanese parts manufacturers, which results in market
discrimination. While we are very conscious of the need for
any country to establish regulations pertaining to safety and
the environment, the Japanese regulations in the aftermarket
go far beyond what is necessary to protect those interests,
and are applied with the effect of creating unnecessary
obstacles to international trade. Japan has chosen to create
and maintain a regulatory system which effectively locks out
foreign competitors and imposes extraordinary additional
costs on Japanese consumers. According to our estimates,
Japan's 34 million households would save $24 billion annually
from deregulation of the auto parts aftermarket.
As you are aware, the United States and Japan have been
discussing measures to substantially increase access and
sales of foreign competitive autos and auto parts in the
Japanese market. After long negotiations, the United States
and Japan have been unable to reach agreement regarding any
of the three principal areas--access and sales of motor
vehicles, original equipment parts, and replacement parts--
that are crucial to a meaningful solution.
I have directed a task force of lawyers and economists to
ready our case for submission to the WTO. I must underline
the seriousness of our intentions in this matter.
Yours sincerely,
Michael Kantor.
____

Japan: One-Way Trade Tactics

U.S. Trade Ambassador Mickey Kantor is currently toe to toe
with the Japanese in the most contentious trade negotiations
to date. The aim is to open Japan to American vehicles and
parts. Agreements have been reached in theory to open Japan
to foreign insurance, medical equipment, telecommunications
equipment and glass. But the toughest and most important
sector--automotive--remains unresolved.
The total American trade deficit with Japan last year was
$66 billion, and 60 percent of that--more than $36 billion--
was in auto trade alone. We can't fix the trade gap with
Japan unless we fix the auto sector. And make no mistake, the
Japanese domestic industry is virtually closed to foreigners
and will remain closed unless we, as a nation, force them to
open it. Here are just a few facts:
American companies have sold 400,000 vehicles in Japan in
the past 25 years. Japanese companies have sold 40 million in
this country. Japanese consumers bought 6.5 million vehicles
last year. Only 301,391 were imported--less than 5 percent of
the market. We project that Big Three sales in Japan will
increase this year by about 12,000 vehicles. Japan ships that
many to the United States every three days. The Japanese auto
parts market is worth $107 billion per year. America's world-
class suppliers have less than 2 percent of that business,
even with the weakest dollar since World War II.
Japan does not play by the same rule book as Western
nations. It is a closed, mercantilistic society with
government and business working hand in hand to prevent any
serious foreign competition in the home market, while waging
an economic war of conquest in overseas markets. With the
second-largest economy in the world, Japan is simply too big
and too important for such behavior to be tolerated. It also
sends the wrong message to newly developing economies that
one-way trade is an acceptable model to follow. It is time
for the Japanese traders to grow up and act like responsible
economic adults in the world trading system. That system is
based on reciprocity. You can sell to us if we can sell to
you.
Totally free trade has always been a textbook theory. It
has never existed in reality. However, when a major trading
nation consistently and egregiously violates the rules of
reciprocity to beggar its neighbors, it can ultimately lead
to the collapse of world trade. Other nations eventually find
the costs of such violations to their own producers to be too
great, and a major trade war develops.
The Japanese or their apologists continually protest that
their auto markets are not closed to imports. It's just that
we don't try hard enough, or that our vehicles are too big or
that the steering wheel is on the wrong side.
It all boils down to an argument that Japanese roads and
drivers are unique and unsuited to ``foreign'' vehicles and
parts--just as a Japanese baseball was unique and unsuitable
for ``foreign'' bats, and Japanese snow was unique and
unsuitable for ``foreign'' skis and just as (for 23 years)
Japanese stomachs were unique and unsuitable for ``foreign''
apples. The list is endless, and the arguments are all bunk.
All of the U.S. companies have right-hand-drive vehicles.
Chrysler was the first of the Big Three to export a right-
hand-drive vehicle from the United States to Japan with the
Jeep Cherokee. The sport utility segment is an increasingly
popular segment of the Japanese market, just as it is in the
United States and Europe. Last year, 197,877 sport utility
vehicles were sold in Japan. Chrysler sold 13,208 vehicles in
Japan; 12,701 of them were Jeep vehicles. That is an
improvement over 1993, but it is still not a level we would
expect in an open market. Japanese officials contend that our
sales are going through the ceiling. If so, it's a very low
ceiling. Those 12,701 Jeep vehicles represented only 6.4
percent of the sport utility market in Japan.
In the United Kingdom, a market we have only recently
entered, we captured a 30 percent share of the gasoline-
powered sport utility market. Both markets are right-hand
drive. Both have domestic sport utility manufacturers. If we
had achieved a 30 percent share in Japan, our sales would
have totaled 59,363 vehicles in 1994.
Chrysler projects sales in Japan of 20,000 vehicles in
1995. This increase can be attributed to a number of things--
favorable exchange rates, competitive pricing on our vehicles
(we just lowered our Jeep prices by 10 percent), the
popularity of the sport utility segment and, certainly, the
current negotiations and pressure by the Clinton
administration. History shows that Japan doesn't liberalize
entry unless there is a reason to do so.
Last year, Chrysler opened a new office in Tokyo and
expanded our staff there. In early 1996 we will introduce a
right-hand-drive Grand Cherokee in Japan, followed by a
right-hand-drive Neon and, in early 1997, a right-hand-drive
version of our new minivan. We are making these substantial
commitments of money, time and engineering talent because we
are counting on the continued efforts of the U.S. government
to expand entry into the Japanese market and other auto
markets around the world.
Chrysler is committed to breaking into the Japanese market
and will continue to expand our presence there with more
products and staff support and by testing the Japanese auto
manufacturers' latest message: that Japanese dealers are free
to sell whatever vehicles they choose. We will be knocking on
dealers' doors, trying to establish broader distribution
opportunities for our products. We will provide Japanese
dealers with more products and profits. And we will offer the
Japanese consumer a wider choice of vehicles.
A trade agreement that provides real access to Japan's
vehicle and parts markets is critical, not only to the Big
Three and our employees, but to all of the related industries
that supply the industry: semiconductors, electronics, steel,
aluminum, chemicals, rubber, machine tools and many others.
All told, about 1.5 million employees of America's automakers
and their suppliers are waiting for Japan to remove its ``do
not enter'' sign.
Regardless of successes in other sectors, the U.S.-Japan
framework negotiations will fail both the American producers
and the Japanese consumers if the automobile sector is not
opened to U.S. vehicles and parts.

Mr. BYRD. Mr. President, I yield the floor.
I suggest the absence of a quorum.
[[Page S6435]] The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SMITH. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________